Should i replace my forty year old gas tank or should i restore it? Is it possible to restore it?
IMO, restoration is for tanks that are not easily replaced. There are plenty of classic/antique vehicles which attract car enthusiasts, but don't have the abundant replacement part selections that Mustangs enjoy. For those vehicles, salvage yard tanks are sometimes the only option.
Before you can use that Eastwood sealer, you've got to get as much of the varnish and scaly rust out of the tank as possible. I believe one popular method is to seal the fuel line fitting, then add a handful of brass hex nuts (ALWAYS non-ferrous, and count 'em first...) and a couple quarts of parts cleaning solvent (such as Varsol) to the tank. Cork the filler port tightly, and shake, shake, shake. The loose bits of metal will help dislodge the crud and allow the solvent to work faster.
Repeat until the solvent drains more or less clean, then allow the solvent to evaporate before applying the tank sealer. Naturally, make sure that all of the brass nuts that went in are accounted for when you shake the tank dry.
The replacement option is a LOT less work - but remember to keep the original fuel sender lock ring. Some of the lock rings that come with reproduction tanks are flimsy and a bit off-size, and don't quite seal as tight as they should.